paul meeusen, head distributed ledger technology, swiss re ...d560374e-d7ba-4472... · (incl....

B3i – Blockchain Insurance Industry InitiativeDeutsche Bank, InsurTech ConferencePaul Meeusen, Head Distributed Ledger Technology, Swiss Re

London, 25 September 2017

P&C Re45%

L&H Re34%

Life Capital12%

Corporate Solutions9%

Europe Asia(incl. Middle East /Africa)

33% 22%

15.1 10.9 7.2

Americas

45%

Swiss Re is a leading and highly diversified global reinsurer

Net premiums earned1

Swiss Re benefits from geographic as well as business mix diversification and has the ability to reallocate capital to achieve profitable growth

by region (in USD bn, 2016)

1 USD 33.2bn as at 31 December 2016; includes fee income from policyholders; does not reflect the exposure to HGMs through Principal Investments (PI)2 Based on additional pro rata net premiums from Principal Investments (PI) including FWD Group (14.9%), New China Life (4.9%) and SulAmérica (14.9%)3 Share of Swiss Re Group’s Economic Net Worth deployed across Business Units (excl. Group Items), 31 December 2016

of whichHGMs incl. PI2: ~5% ~ 4% ~ 16% ≈25%

Economic Net Worth3

by business segment (in %, 2016)

2

Blockchain Introduction

3

Standardisation and Innovation

4

Malcolm McLean

By Maersk Line - Malcolm McLean at railing, Port Newark, 1957, CC BY-SA 2.0, https://commons.wikimedia.org/w/index.php?curid=27640875

Shipping Insurance

The Problem High goods conversion costs High frictional costs

The Challenger Trucking entrepreneur Blockchain Insurance Industryinitiative (B3i)

A Standard The Container Data Language on Distributed Ledger

Customer benefit Global trade Affordability of protection

Mission Easier transport and trade ofgoods

Easier handling and trading ofrisks

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Basic introduction (1)

Distributed Ledger (2)

keeping score of who owes what to whom

=

Cedent A is reinsuredwith Reinsurers B and C

Cryptography

unique combination of technology, consensus

finding and security+

B and C should not see certain things of each other

Smart Contracts

decentralise and automate authorization and

authentication

+

Legal (contract) logic is putinto computational logic

OLD WORLD

NEW WORLD

each hold and repeatdata in own ledger

shared, immutable data on a distributed ledger

privacy, security and regulatory concerns

public/private keys andconsensus algorithms

labour intensive and manual processes

“self executing” contracts

(1) More info: www.blockchain-documentary.com(2) DLT: Distributed Ledger Technology; B3i uses Hyperledger

Blockchain in a nut shell

Blockchain and Smart Contracts

6

Audit logsoperated

across multiple organizations

Who did

What

When?

Business logicoperated

and verifiedacross multiple organizations

Who did

What

How?

Blockchain Smart Contracts

Data Assurance Process Assurance

7

What has changed?

Web 1.0 / Web 2.0

Data is copieddigitally

Ownership is transferreddigitally

Videos

Images

Music

Texts Intangible assets: Currency Shares Patents Certificates Personal data

Tangible assets: Real estate Goods

Obligations: Contracts Pledges

User 2User 1

Blockchain

User 2User 1

Transfer of ownership : essential to financial services.

Business Implications to Re/insurance

8

Unlocked potential

9

Across the Re/insurance Value Chain

Policy Holder

Insurer ReinsurerRetrocessionaire

Efficiency potential• Automation and digitisation• Data standards• Digital signoffs• Reduced waiting times• Reduced reconciliations

Risk reduction• Credit risk• Cash flow inefficiencies• Operational risk

Blockchain explained in layman insurance terms

More info:

How to unlock it

10

Traditional ledger Shared ledger

Reporting

Reconciliation

Reporting

Reconciliation

$$

Sharedledger

Data Input

AutomaticValidation

AutomaticValidation

AutomaticValidation

AutomaticValidation

AutomaticValidation

AutomaticValidation

ReportingReporting

Reporting

Specifics of a Shared ledger Establishes single version of the truth

11

Traditional ledger Shared ledger

Sharedledger

12

VisionBlockchain could facilitate the emergence of peer-to-peer marketplaces

���In

sure

ds Insurance Risk

Placement

Demand

1

� �

� �

�

Capital

3

SmartContract

Smart Contract

Risk-intelligence”

& pricing 2

Settlement

4

Inve

stor

s

• Vision: manage and trade risks better

• Initiative launch: Swiss Re hosted the foundational meeting in October 2016

• Membership: currently 15 members, with several new joiners upcoming

• Current Focus: P&C Property Cat XL prototype

• Outlook:- Pipeline of use cases including commercial and primary insurance- Incorporation of permanent organisation

Blockchain Insurance Industry Initiative (B3i)A true industry collaboration

13

www.b3i.tech

Benefits & Outlook

14

Swiss Re expects a range of benefits

15

Working Capital Improvement

Faster and more efficient premium and claims settlement and optimised liquidity management

Operational Efficiency and Risk Reduction

Reduction of contract uncertainty, reconciliations and process inefficiencies

Quality and Integrity of Data

Normalised and high-quality data in a shared source with central control over integrity and easier auditing

Foreign Exchange Management

Accelerated FX transactions and consistent valuation

Positive Impacts: • Combined Ratio – conservative estimate of -0.5% • Improved liquidity• Risk Reduction

More info: https://www.linkedin.com/pulse/b3i-turning-blockchain-use-case-business-paul-meeusen?published=u

Scalability

Speed

Cost

Wider Industry Benefits Traditional Insurance Platform

Distributed Ledger Insurance Platform

Expected loss

Costs (expenses, capital)

Trust

2 - 8 weeks

4 – 24 hours

Profit

Expected loss

Costs (expenses, capital)ProfitWhat

•distributed technology•smart automation•lower frictional costs•reduced risk

Why•more affordable

insurance•closer to risk pools•new generation of

customers

16

Cost of alternative funding > Cost of reinsurance = f (price adequacy, frictional costs )

17

Outlook“Masterplan” – how we see use cases develop in re/insurance

Reinsurance Commercial Insurance(wholesale – B2B )

Primary Insurance(retail – B2C)

Materiality High Medium Low

Transaction volume Low Medium High

Homogeneity High (global) Medium (international) Low (local)

Data privacy Medium Medium High (sensitive, regulated)

Diversity of regulation Medium Medium High (per jurisdiction)

1 2 3

Establishing baseline At later stage and in synergy with other technologysuch as IoT, Robots, Chatbots, Sensors, AI

• Gradual expansion of blockchain applications across industry value chain

• Reinsurance good starting basis with less diversity and ability to reach scale quickly

• Commercial insurance expected as next transition stage, then primary

1818

Thank you

paul_meeusen@swissre.com

www.b3i.tech

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Legal notice

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©2017 Swiss Re. All rights reserved. You are not permitted to create any modifications or derivative works of this presentation or to use it for commercial or other public purposes without the prior written permission of Swiss Re.

The information and opinions contained in the presentation are provided as at the date of the presentation and are subject to change without notice. Although the information used was taken from reliable sources, Swiss Re does not accept any responsibility for the accuracy or comprehensiveness of the details given. All liability for the accuracy and completeness thereof or for any damage or loss resulting from the use of the information contained in this presentation is expressly excluded. Under no circumstances shall Swiss Re or its Group companies be liable for any financial or consequential loss relating to this presentation.